Okay, so what is 'Support'? What's 'Resistance'? What does 'Consolidation' mean?
I heard people talking about this stuff in the chat bits on eToro, and they'd say, you
know, "Yeah, it's got support at 220..." or "it's got resistance at 350..." And I'd
think "What are they talking about...? I had no idea what they were talking about, I'd just, you know, sort of nod -
"yeah, all right..." go along, you know... read the other comments. But, it made quite
a big difference, really... When I was talking about that stuff, where I used to do
too much leverage, and then it would start dropping, and I'd sell, then it would start
going up, and I wouldn't know why and... So, this stuff about support and
resistance, kind of helped, a bit, with understanding what was going on there...
And 'channels' - things called 'trading channels' and 'trend lines' and - this is
mostly about charts, and technical analysis. Really great traders,
obviously, they do fundamental analysis. They understand what they're trading in, a
bit about the company, or the stock, or the asset, or you know... what improvements
are going to happen. They know stuff about the actual product itself, and they
use technical analysis to know, sort of - let's say they think "Yeah, it's going to go up..."
They're pretty sure it's going to go up in value, or down in value, but they use
technical analysis - charts, to look at when to actually come into a trade, to
maximise their profits. Now, some really big traders say 'Nahhh, I don't care that
much, because if I miss out on a small bit because I came in at the wrong time,
I don't care, because overall, it's going up, or overall it's going down..." But, it's
been really helpful to me. It's just nice to understand what they're talking about in
these conversations, so I'll show you... So, if I go to - let's say I go to Ethereum.
Because I've been looking at that a lot... So, Ethereum... and I go to the charts - normal
chart page. And we're used to seeing this. We're used to seeing a bunch (or I am a...) a bunch ...
I might change the background to black. All the better traders seem to use that,
so I might just copy them... But, you see these normal charts. The lines - they go up and
down and all the rest of it. So, let's say I put it in a... yeah, here we are - daily. So, this is
the daily view. Each chart, each 'Candlestick' represents a day. Green ones,
obviously, it's gone up in that day... The red ones, it's obviously gone down in that day.
Where that - this bit - the 'Wick' - the bit without the
colour on it... That represents the lowest point it hit that day, and that represents the
highest point it hit that day. That's where trading opened, and that's where trading
closed. So, again - that one, the red one - the top is where trading opened, and the
bottom is where trading closed. Green one - bottom is where it opened for the
day, and the top is where it closed for that day. So, if I zoom... Oh, it's doing this - why is
it doing this... Alright, let's say I go to here...
Alright, you see how the stock was, sort of, going up here... So, we started - this is a
long time ago. This is, you know... I can't zoom out because something's happened to
my mouse and my trackpad... But, let's say this stock, right - so it started really low, it's
at 12.50. This is right at the beginning... Then it shoots up, okay - so you see the stock's
shooting up. And then it stops there. O.K, it stops about here... Something says "No, don't
go further than that..." and then here - this is called 'Consolidation', all right.
It means that the price isn't going up a lot - these are - each one of these
represents a day... so, there isn't a lot of swing - it's basically... it's stayed at a
level, then it's started to consolidate here. It's gone up a bit...
'Consolidated' means it's found some sort of good level, where people think
"Alright, it's safe - it's not going to suddenly go back down..." It's shot up again, it's hit
resistance here... 'Resistance' would be the thing which stops it going up more. Let's
see we're all - I'm going to talk as if you're buying a stock, okay. If you're
selling, it goes the other way around... So, if you're buying a stock, resistance
is the point where something stops the price from going up a bit more. So booom,
it hits resistance. The resistance is actually here - this is
where people said "All right, no, we can't go above that..." It drops a little bit.
It hits support here, 'Support' is the point at which people say "No no, it's
gone long enough - it's gone down enough, now we want to go up again.. that's it,
we're not going to..." So, look - if you look at this line, you see the line I'm
drawing - you see how it matches. It hits this one here, boom, but it also hits the
bottom of this one, and this one - do you see that... see that.
So, that's called a support level. So a support level - the thing is, if you look
at a bigger section of this stock, you'll see support levels in different places,
and resistance in different places, all over the charts. So there it went boom, it
started going up again, here... So we're going up, and then oooops, it hit some sort
of resistance here... See, look - again, it's at the top of this candle here - matches
up with the same place where people thought 'Oh no, it's going to go down, it
won't go above this..." A lot of this is just psychology of masses of people. Big
groups of people get together, and if you get a big group of people in some square,
some Town Square, and someone at the other side shouts "Monster!", and someone
starts running, then another guy starts running "Arrrgghhhhhh!..." then everyone starts running,
because someone shouted "monster". There may be no monster, but someone shouted
one, so... Take the same analogy. The crowd's running, and you hear another guy - there's
a big sort of building, and there's a bunch of people in the door going "It's safe over here,
it's safe, come in..." The crowd goes "All right...!" Lots of people start running
towards them - most likely, most people will end up running to that safety,
because we work as a crowd... We're kind of crowd animals. And a lot of it's kind of the
same here. So look, they thought "No, it's not
going to go above there..." Sold again, and it dropped down, and they remembered that,
down here, there was a support level. So they thought "Well, I don't think it will drop
below that again..." and it didn't - look... so it hit that same level, and the crowd said
"No, that should be it..." and off they went... So, they moved a little further... So then,
it bounced off that support - so people now think, once it's hit the support
twice, they think "All right, it's safe..." It starts going up again. Let's see ... So, on this day,
it stopped around about this same support level - this same resistance
level. But, then it broke out, okay. So what you have, is you have - support is the base,
boom "well, I don't think it's going to go lower than that..." Resistance will be the
upper one - "naaah, I don't think it's going to go higher than this..." Consolidation
would be where it's, sort of - it's been doing ... Let's say a stock has been
doing massive things - it's been, let's go for a
four-hourly thing... Okay, so like, there's places at which you know the stock - here,
has just been going up - it's gone from 222, and going up, and up, and up, and up
and up, and it's got all the way up to here - 310
That was recently. So, people go "Oh my God..." there's a huge fluctuation in
price - it's just been going up for like a week, or two weeks, or whatever. A week...
It's been going up, and up, and up, and up. At some point, that stops - everyone goes
"Oh my God, is it going to go down...!" So, it goes down - quite a bit down, here to 285,
and it hits support - there. Then it goes up, and it's at 308, and then it goes down
and it's 292. You see how that swing is getting narrower - so it stopped here, down to
there, it went up, but a little lower than before. It went down, but a little lower
than before... This is where, the price is starting to consolidate, okay. So, it's
starting to reach a point where people think "Alright hold on a minute..." There's a
consolidation between this range, okay. Now, a 'range' is the area of trading
between support and resistance, because sometimes, you think, you know, stocks are
just randomly going up and down... Sometimes - let's say here, the support is -
let's say it's between 290 and 310. It might just stay there going - 290 "Go up again,
go up again..." 310 "No no no - go down again..." 290 "No no no, go up...!" It might
just do that for a few days - it's a trading channel. It trades in a
range between a bottom, and a top.. A support, and a resistance. Now, usually,
when it breaks out of that channel - people can draw a line, sometimes you see
these charts, and they draw lines.They'll get a chart like that, and
they'll draw a line along the bottom, a line along the top, and it'll be, sort of,
bouncing between it. Or, you'll notice, when people are... Now, the channel that
they draw - this is called the 'trend lines'. They draw two trend lines. Sometimes, that
channel can be going up - so it's going up, but you can, sort of, draw two lines - one
beneath all the bottom points, and one on all the top points, and you can see that
it's going up, but it's sort of going ding-ding-ding-ding-ding,
in a channel, and people can buy and sell within that channel. I tried it, with too
much leverage, lost a lot of money... So, I don't really try that so much anymore. I just look
at the overall trend for now - till I know more. It could also be a downwards
channel. So, it's dropping, but it's dropping like this - or a sideways one,
you know... Now, often when it breaks out of that channel, that's what people are
looking for. They're waiting for a 'breakout'. You'll hear that one, as well.
So, they're waiting till it goes either above the top line - the resistance line, or
beneath the bottom line - the support line. Usually, when it does that, it sort of
accelerates in whichever direction it's going. Sometimes that can fool you though...
So, sometimes it looks like it's breaking out - people buy "Oh my God, it's broken out!"
and it doesn't - it just goes down again, and everyone goes "arrrgghhh!".
So... At the moment my screen, for some reason, won't let me actually zoom
out and zoom in, so I can't show you this, sort of, more accurately. But that's
really what resistance and support are. If you look at shorter charts, it becomes much
more evident. So, if you put it on a 30-minute chart, and you start to look at
where it keeps going up to, and where it keeps going down to, you'll notice
support lines. Like, there's a support line - so you see how, here it hits
boom, 279. So, later on, that same one is used again, you see - it becomes a level
where people are watching. And here, look - so it becomes a level
where people think "O.K, it might have some sort of change in direction where
it hits that point..." If you look over the charts - if I could zoom out properly, I
could show you, but I can't... If you look at the charts, let's go to
something else - see if it works. I'm going to Tesla - I like Tesla. And, no, it's
just not letting me do it. But, you'll be able to see these all over the place - here's one
look on Tesla - so, you see this line here - how the line... I get this line by pressing
here, by the way - you see that line hitting on this one, this one, this one,
and this one. So, there is a support line 363.57, and
it's hitting on this one here - you see it... So, right there, you can start to see
where that number, for some reason, becomes significant. So, on this one, it was
resistance... On this one it becomes support... But they become significant - you
can draw these lines, and see areas of support and resistance across these
charts. It helps to make a little more sense of what is going on, really. When
you look them... That's it - that's a little bit about support, resistance, and
consolidation. So, consolidation is where it's forming a level, at a certain line, so
that in future, if you go up a lot, and you spike up, and there's a big crash, people
look for areas of consolidation, where the price generally traded at a similar
level, for a long time - because that - those areas of consolidation, then they provide
strong support, because there's so many lines matching up along there, it will
frequently - people will see that as a safe level. So, if it's falling, areas of
consolidation in the past now act as supports, you see... That's it
for now.